The interim report, according the FTC, describes how, amidst increasing vertical integration and concentration in this marketplace, PBMs are profiting at the expense of consumers by inflating drugs costs and forcing independent pharmacies out of business.

On July 9, 2024, the Federal Trade Commission (FTC) released an interim report as part of an ongoing investigation into pharmacy benefit managers (PBMs) and their impact on access and affordability of medications and anticompetitive conduct by PBMs toward competing, independent pharmacies. The interim report, according to the FTC, describes how, amidst increasing vertical integration and concentration in this marketplace, PBMs are profiting at the expense of consumers by inflating drugs costs and forcing independent pharmacies out of business. The report comes approximately two years after the FTC announced it was proceeding to conduct a 6(b) study to assess the extent to which PBMs are influencing the medications being prescribed to consumers, the often-exorbitant costs of such medications and the extent to which PBMs exclude independent pharmacies from participating in networks to dispense medications to PBM members.

More specifically, the FTC has advised that, by its 6(b) study, it is investigating the following PBM practices:

• Fees and clawbacks charged to independent pharmacies long after medication is dispensed to PBM members;
• Methods to steer patients away from independent pharmacies toward PBM-owned or affiliated pharmacies;
• Unfair and burdensome audits of independent pharmacies;
• Complicated and opaque methods to determine pharmacy reimbursement;
• The magnitude of medications requiring prior authorizations and other restrictions impeding the fills of medications to PBM members;
• The use of specialty drug lists and specialty drug policies to minimize the number of independent pharmacies permitted to dispense such medications; and
• The impact of rebates and fees from drug manufacturers to PBMs on the formularies created by PBMs and the costs of medications to insurance companies and consumers.

By its interim report, published in advance of a full Rule 6(b) study report, the FTC determines that PBMs are wielding immense power over patients’ ability to access and afford their prescription drugs, allowing PBMs to significantly influence what drugs are available and at what price. The report finds that this consolidated market power (of which the three largest PBMs control 80 percent) can have dire consequences for consumers, with nearly 30 percent of Americans surveyed reporting rationing or even skipping doses of their prescribed medicines due to their high costs.

The FTC also states in its interim report that PBMs dominate independent pharmacies and control their ability to remain in operation by imposing unfair, arbitrary and harmful contractual terms, such as below-cost reimbursement. 

While the interim report provides key insights into many PBM operations that have been scrutinized for decades, the FTC makes clear that it still requires more time to finalize its investigation, as certain PBMs continue to fail to timely respond to information requests served on them by the FTC. The FTC states that, to the extent such PBMs continue to evade their obligations to provide information requested by the FTC, the FTC will seek to compel production of such information from these PBMs in federal district courts.

Based on the substantial data the FTC has already gathered, the interim report offers the following conclusions regarding PBMs:

• The market for PBM services has become highly concentrated, and the largest PBMs are now vertically integrated with the nation’s largest health insurers and specialty and retail pharmacies.
• As a result of this high degree of consolidation and vertical integration, the largest PBMs can now exercise significant power over consumers’ ability to access and afford their prescription drugs.
• Vertically integrated PBMs may have the ability and incentive to steer patients to their own affiliated pharmacies, increasing prescription drug costs and threatening the viability of competing, independent pharmacies.
• PBMs and brand drug manufacturers negotiate prescription drug rebates, some of which are expressly conditioned on limiting access to potentially lower-cost generic and biosimilar competitors, cutting off patient access to lower-cost medications.
• Increased concentration affords the largest PBMs leverage to enter into complex and opaque contractual relationships that disadvantage independent pharmacies and the patients they serve.

Notably, the FTC recognizes in the interim report the value of independent pharmacies to consumers, stating that such “pharmacies provide a range of benefits to their patients, including providing timely medical guidance and screening services that play an important role in better health outcomes, especially for vulnerable individuals who otherwise have limited access to care.” With this backdrop, the interim report finds that because of the enormous market power wielded by the largest PBMs, independent pharmacies often have little choice but to contract with the major PBMs to serve patients, which provides the largest PBMs the ability and incentive to impose unreasonable contract terms on such pharmacies.

Significantly, the interim report further validates tens of thousands of complaints to the FTC over the past decade by independent pharmacies about PBM misconduct. The FTC concludes in the report that PBMs are, in fact, using their market power across the distribution chain to set reimbursement rates at untenably low levels for independent pharmacies, often forcing them to cease operations, driving up the costs of medications and exposing consumers to far inferior healthcare.

As the FTC continues its investigation of anticompetitive PBM conduct toward independent pharmacies and consumers, the importance of the interim report cannot be overstated. The interim report’s conclusions further assist numerous state legislatures, federal agencies and the Department of Justice Antitrust Division’s Task Force on Health Care Monopolies and Collusion, all of which are likewise in the midst of investigating unlawful, anticompetitive conduct by PBMs and in the process of formulating solutions to assist independent pharmacies and consumers to halt such conduct.

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